When converting a company from one corporate form to another, one of the decisions to make is whether to obtain a new Employment Identification Number (EIN) or to keep the current EIN in place.

An EIN is a unique nine-digit number for U.S. business entities used for tax filings and identification purposes. An EIN is often required before a company can transact business, such as opening a bank account, hiring employees, and/or paying certain taxes such as payroll and excise taxes. Generally, when a company undergoes a conversion, a question arises as to whether the conversion will trigger the need to obtain a new EIN. This can lead to confusion as there is no universal answer on what to do.

In some circumstances, there can be significant advantages to retaining the existing EIN for the converted entity. For example, when a company used its historic EIN to obtain necessary state licenses and registrations, there can be a significant cost to reapply for these licenses with a new EIN.

In a different scenario, when a limited liability company that is classified as either a disregarded entity or a partnership for U.S. federal income tax purposes is converted into a corporation, generally, the resulting converted entity is deemed to be the same entity as the converting entity under state law. The converted entity will not need to obtain a new EIN provided the entity either (1) files IRS Form 8832, Entity Classification Election, electing to be classified as an association taxable as a corporation, or IRS Form 2553, Election by a Small Business Corporation, electing to be classified as an S Corporation, prior to the date of the conversion, or (2) sends an EIN retention letter to the IRS stating that it wishes to retain its EIN in accordance with the Internal Revenue Service’s (IRS) internal procedures set forth in Internal Revenue Manual 3.13.2.26.12.

In the case of any cross-species conversion or merger, the form of the transaction must be analyzed to determine whether, under current IRS rules and guidance, the entity is able to retain its historic EIN. If not, the entity may want to consider whether the transaction steps can be modified to permit the entity to retain its historic EIN.

For questions about EINs and conversions, contact a member of Taft’s Mergers and Acquisitions team.